How to Apply for Tax Exemption in Texas: Forms, Filing, and Denials

To apply for tax exemption in Texas, a qualifying nonprofit files an application with the Texas Comptroller of Public Accounts, using one of the AP-series forms that matches the organization’s type, and attaches its governing documents and (where applicable) its IRS determination letter. A single application can cover sales and use tax, franchise tax, and the state portion of hotel occupancy tax.¹ Property tax is not part of this process; it is handled by the county appraisal district where the property sits.

What State Taxes You Can Be Exempted From

The Comptroller handles three state exemptions through one application:

Sales and use tax on items the organization buys for its exempt activities. This is the exemption most nonprofits are after.²
Franchise tax, available to organizations federally exempt under IRC Section 501(c)(2), (3), (4), (5), (6), (7), (8), (10), (16), (19), or (25).³
The state portion of hotel occupancy tax when employees or authorized representatives of an exempt religious, charitable, or educational organization travel on official business. Local hotel taxes are still owed.⁴

Eligibility runs through Texas Tax Code Section 151.310, which covers organizations created for religious, educational, or charitable purposes where no part of net earnings benefits a private shareholder or individual and purchases relate to the exempt purpose.⁵ A federal exemption under IRC Section 501(c)(3), (4), (8), (10), or (19) also qualifies the organization for Texas sales tax exemption on the strength of that federal status.¹

Choose the Right Application Form

The Comptroller uses different forms depending on the type of organization, all available on the Comptroller’s website.⁶

Form AP-204 is the general application. Use it if you are applying on the basis of your federal tax-exempt status under a qualifying IRC section, or if your organization doesn’t fit one of the categories below. Veterans organizations exempt under IRC Section 501(c)(19) also use AP-204.¹
Form AP-205 is for nonprofit charitable organizations seeking exemption from sales tax, hotel occupancy tax, and franchise tax.⁷
Form AP-207 is for nonprofit educational organizations.⁶
Form AP-209 is for nonprofit religious organizations, covering sales, hotel, and franchise tax.³

If you’re a local chapter under a parent organization’s IRS group ruling, you may not need to file at all. A subordinate can ride on the parent’s Texas exemption when the subordinate is a recognized member of the group ruling, the group exemption meets Texas requirements, and the parent’s group exemption is already on file with the Comptroller.⁸ If the parent’s group ruling has not been registered with the Comptroller, the subordinate files Form AP-204 with a copy of the IRS determination letter.

Documents to Gather Before You File

Have these ready before you start filling out the form:

Your Federal Employer Identification Number (FEIN), if you’re applying on the basis of a federal exemption.
Governing documents: Articles of Incorporation, Certificate of Formation, bylaws, or constitution. They need to state a nonprofit purpose and include a dissolution clause explaining how assets will be distributed if the organization closes. Unincorporated organizations should submit bylaws or a constitution.⁷
Your IRS determination letter, with any addenda, if you hold a federal exemption. The name on the letter must match the legal name in your formation documents. If the determination letter is more than four years old, include a current IRS verification letter alongside it.¹
A written narrative of the organization’s planned activities and financial sources.

Nonprofits formed outside Texas must also include a copy of the corporation’s formation documents and a current Certificate of Existence issued by the state of incorporation. That applies whether the exemption request rests on federal status or on a specific Texas exemption category.¹

Filling Out the Application

The Comptroller cross-references formation documents on file with the Texas Secretary of State, so names of officers and directors on your application should match what appears there, and the FEIN should be entered exactly as it appears on your IRS confirmation letter.¹ Discrepancies between the application and the underlying legal documents are a common reason applications get held up or denied.

When you describe the organization’s activities, use language that aligns with the purpose clause in your Articles of Incorporation or Certificate of Formation. If the bylaws say the group provides free medical supplies, the form should explain specifically how those supplies are distributed and who receives them. Be explicit about which exemptions you’re requesting, since sales tax and franchise tax are distinct legal categories. The form also asks for your accounting period so the Comptroller can align it with your fiscal year.

How to Submit and What Happens Next

Completed forms can be mailed to the Comptroller’s Exempt Organizations Section in Austin or submitted through the Comptroller’s online portal. Electronic submission generally produces a faster acknowledgment than paper. Reviewers compare your application to the formation documents on file with the Secretary of State to confirm the organization was created under a qualifying legal authority.¹

You’ll receive a written determination letter at the address on file. If approved, it includes the exemption number and effective date. Keep it as a permanent record; vendors and agencies will ask for it when you claim the exemption. If the office needs more information before deciding, it will send a written request with a deadline; missing the deadline closes the file.

Property Tax Is a Separate Application

Property tax exemptions do not go through the Comptroller. You file with the appraisal district in the county where the property is located, and that district’s chief appraiser decides eligibility. The general deadline is before May 1 of the tax year.⁹ Charitable organizations seeking property tax relief must show the land is used exclusively for the organization’s primary exempt function under Tax Code Section 11.18.

If the Application Is Denied

The determination letter explains the reasons. Common causes are mismatches between the application and the governing documents, missing documentation such as an expired IRS determination letter without a current verification letter, or activities that don’t line up with a qualifying exempt purpose.

You can generally request a redetermination hearing by submitting a letter with a statement of grounds explaining why you disagree. The Comptroller’s published procedures allow a 60-day window from the date of the determination to contest it.¹⁰ If the administrative process doesn’t resolve the dispute, filing suit in district court may be an option.

For a property tax denial, the appeal runs through the county’s Appraisal Review Board. If you disagree with that board’s decision, you can file a petition for review in district court within 60 days of receiving the written order.¹¹

Using and Keeping Your Exemption

Once you’re approved, you claim the sales tax exemption at the register by giving the vendor a properly completed Texas Sales and Use Tax Exemption Certification (Form 01-339).¹² The certificate needs the purchaser’s name and address, a description of the items, the reason for the exemption, and a signed, dated line.¹³ If a non-employee makes purchases on the organization’s behalf, that agent completes the certificate in the organization’s name, not their own. The exemption applies only to items tied to the exempt purpose.

The Comptroller can review an organization’s status at any time when there’s reason to believe it no longer qualifies. To stay in good standing, the organization must remain organized and operated solely for exempt activities, keep net earnings from flowing to private shareholders or individuals beyond reasonable compensation, and notify the Comptroller in writing right away if anything changes that would disqualify it. Losing a federal 501(c) exemption automatically terminates the Texas sales tax exemption, and if the exempt status ends, you must promptly tell suppliers that future purchases are taxable.¹⁴

1
Comptroller of Public Accounts. Guidelines to Texas Tax Exemptions
2
Texas Comptroller. Tax Exemptions for Qualified Organizations
3
Texas Comptroller of Public Accounts. Application for Exemption – Religious Organizations
4
Texas Comptroller of Public Accounts. Hotel Occupancy Tax Exemptions
5
State of Texas. Texas Tax Code Section 151-310 – Religious, Educational, and Public Service Organizations
6
Texas Comptroller. Texas Applications for Tax Exemption
7
Texas Comptroller of Public Accounts. Application for Exemption – Charitable Organizations
8
Texas Comptroller. 501(c)(3), (4), (8), (10) or (19) – Texas Exemptions
9
Texas Comptroller. Property Tax Exemptions
10
Texas Comptroller of Public Accounts. Contesting Disagreed Audits, Examinations and Refund Denials
11
Texas Comptroller of Public Accounts. Appraisal Protests and Appeals
12
Texas Comptroller of Public Accounts. Nonprofit and Exempt Organizations – Purchases and Sales
13
Legal Information Institute. 34 Texas Administrative Code 3-287 – Exemption Certificates
14
Legal Information Institute. 34 Texas Administrative Code 3-322 – Exempt Organizations